Question

Consider a country with 200 million residents, a labor force of 170 million, and 10 million unemployed. Answer the following questions: (show your work for credit) a. What is the labor force participation rate? b. What is the unemployment rate? c. If 3 million of the unemployed become discouraged and stop looking for work, what is the new unemployment rate?

Answer 1

a) 85%

b) 5%

c) 3.5%

Step-by-step explanation:

Given;

Number of residents = 200 million

Labor force = 170 million

Unemployed = 10 million

a) Labor force participation rate =
`\frac{\textup{Labor Force}}{\textup{Number of residents}}`

or

Labor force participation rate =
`\frac{\textup{170 million}}{\textup{200 million}}`

or

Labor force participation rate = 0.85 or 85% (0.85 × 100%)

b) unemployment rate =
`\frac{\textup{Unemployed}}{\textup{Number of residents}}`

or

unemployment rate =
`\frac{\textup{10 million}}{\textup{200 million}}`

or

unemployment rate = 0.05 or 5% (0.05 × 100%)

c) Number of unemployed who became discouraged and stop looking for work = 3 million

Therefore,

The unemployed population = 10 million - 3 million

= 7 million

Thus,

new unemployment rate =
`\frac{\textup{New Unemployed}}{\textup{Number of residents}}`

or

New unemployment rate =
`\frac{\textup{7 million}}{\textup{200 million}}`

or

New unemployment rate = 0.035 or 3.5% (0.035 × 100%)